Continuous improvement at the Sedex China Conference

The Sedex China Conference 2017 was held at the JW Marriott Hotel in Shanghai on 18 May to answer the question “in the sustainable development of the supply chain, do you agree with continuous audits or collaboration for continuous improvement?”. Hundreds of participants from around the world joined the conference including multi-national buyers, suppliers, auditing firms and representatives from industry associations.

In his opening speech, Jonathan Ivelaw-Chapman, Sedex CEO, emphasised the importance of “collaboration in action- Sedex driving the roadmap for responsible sourcing”. He provided examples of Sedex collaborating with organisations like EICC to establish a better platform and community for the company to make it simpler to do business that’s good for everyone. He also mentioned that Sedex will continue having open dialogue and conversations to look for collaboration opportunities to support its members and stakeholders in the journey of responsible sourcing.

David Yeung from Benchmarks moderated a debate over “continuous audits or collaborative improvement?”. Lots of interesting views were discussed including Roland Qin from Mars, Yuki Tse from Leverage and Star Liu from Sedex who argued in favour of continuous audit:

Audits have been developed and improved continuously over time;

Audits are a starting point, they provide a basis to inform corrective action in the future;

Audits provide a fair and consistent way to assess facilities;

Audits when shared with multiple stakeholders reduce duplication.

On behalf of suppliers, Raven Ji from Falabella, Qingbo Ye from Sparkly Wick Leather and Michael Ning from Ningbo Jade, supported collaboration for continuous improvement measures because they believe continuous audits do more harm than good:

Audit requirements are beyond local suppliers’ capability, and different standards conflict with each other;

A lack of an effective monitoring mechanism for auditing companies;

If suppliers commit their resources to complete audits, they reduce their effectiveness and production output.

The group concluded that buyers should take the initiative to co-operate with suppliers and optimise their resource allocation.

Aileen Ma from Accor Group then moderated a discussion between three brands including The Body Shop, Dell and Mars to discuss from a buyer’s point of view, what they think of “continuous audits” and “collaboration for continuous improvement” in responsible supply chains.

Laura Ferrington shared The Body Shop’s practices in responsible supply chains by discussing their brand values and the characteristics of the cosmetics industry. Their supply chain risk is more likely to appear in Tier 2 or Tier 3 suppliers, so they have been working to build shared goals, joint onboarding and ownership of suppliers, and a wider job scope for buyers. Laura described “Enrich Not Exploit™” as an example to elaborate how they practice continuous improvement and how all stakeholders can benefit from the goals.

Mars was a representative from the food industry and Roland Qin described the three steps they take to practice responsible sourcing:

Collect supplier’s information.

Conduct audits.

Capacity-building.

Mars assist key suppliers by optimising resources to prevent high risk areas in their supply chain. Roland shared a good example of when they met illegal worker problems in the Thailand fishing industry, they collaborated with local suppliers and NGO’s to take responsibility and carry out corrective actions.

The electronics industry and the trade relationships between buyers and suppliers are relatively stable. But there are still problems with managing overtime and system problems within the supply chain. Jason Ho from Dell said they control their supply chain risk using two dimensions, the first being the use of macro data on suppliers to complete risk assessments. On the other hand, they collaborate with NGO’s and high-risk suppliers to complete specific improvement projects. Dell insists combining continuous audits with capacity building measures to reduce the risk within their supply chain.

During the afternoon session, buyers mentioned NGO’s on a number of occasions and the discussion continued with further examples of best-practice sharing. Xiaoyu Luo from Solidaridad, a global solution-oriented civil society organisation, shared an example of their Better Mill Initiative (BMI) to demonstrate how they support suppliers to achieve continuous improvement. Partnering with six brands including H&M and C&A, Solidaridad’s BMI programme has supported 43 factories to address issues such as water and energy efficiency, chemical and waste management, and workplace health and safety. This empowers suppliers to have the knowledge and capabilities to improve their daily production to both help prevent negative environmental impacts and save costs throughout their operations.

This was followed by Alex Wang from Fuen Textiles, a key Chinese textile supplier for leading fashion brands. Alex shared the company’s roadmap for supply chain sustainability which involves achieving certification, joining the audit and assessment program, but also participating in ongoing training and being involved in continuous improvement projects. Alex emphasised that the success of a supplier striving for continuous improvement could be determined by four key areas: an ethical driving force from the customer, awareness and support of the management team, collaboration of all internal departments, and recognition from the employees. Alex and his company see the benefits and the value of being a responsible business, not only getting more business opportunities but also enhancing their own competitive advantage in the market place.

A panel discussion session also put focus on two key approaches; “continue with audits” or “collaborate for continuous improvement” within the responsible supply chain to enhance the overall management and operational performance of suppliers. Besides the representative from Solidaridad and Fuen Textiles, other representatives on the panel came from the China Electronics Industry Standardization Association and ESTS (the social auditing body). The key discussion results are listed below:

Mindset changing is vital for a supplier; suppliers need to embrace rather than resist when working with customers in the area of responsible supply chain

Thoroughly examine each audit findings to discover the underlying issues in the business and also initiate a proper internal auditing mechanism, an effective management system is key for a sustainable business

Buyer’s continuous improvement programs such as training or supplier capacity building should not always be a “show” (show to key stakeholders, the public), it should effectively empower suppliers to learn and implement action into their day to day operations

Buyer’s support of fostering a responsible supply chain is just the beginning of continuous improvement, suppliers need to take ownership and utilise the opportunity to develop further

Industry associations can play an important role in enhancing the performance of responsible supply chains for suppliers, as they can reach hundreds of suppliers in the same sector to share best practice, especially SMEs who often do not get direct support from their customers

At the conclusion of the meeting, Tao Liu from SynTao provided a broader view of Corporate Social Responsibility (CSR), to grow the audience’s mindset. In his speech, he said businesses are currently aiming to “reduce the negative impacts on society and employees” which is what responsible supply chains focus on. He mentioned that businesses need to be proactive and must continue “looking for better ways to contribute to society as a whole and make positive impacts for our generation”. Syntao shared the latest CSR trends in China, such as the implementation of SDGs (Sustainable Development Goals) in the Chinese market, new laws and regulations on green supply chains, responsible consumption awareness from Chinese consumers, the green investment etc. “Making a responsible business is not something your customer asks you to do, it is your own responsibility for your employer, your customer, and the whole society”.

Both “continuous audits” and “collaboration for continuous improvement” are approaches businesses can take to become a responsible business. There is no right or wrong, no better or worse, it purely depends on the company or organisation to adopt or implement such practices across their different stages to ensure they have a responsible supply chain. However, no matter which approach a business takes, a major factor involves “collaboration” – collaborate with your customer, collaborate with your internal team and employees, collaborate with your wider stakeholders. Only with collaboration, will businesses see more benefits and more improvements, alongside building long term trust and sustainable business relationships.